Recital 47 of the CRD states that consumers can withdraw from the contract regardless of how the goods have been handled during the withdrawal period: “Some consumers exercise their right of withdrawal after having used the goods to an extent more than necessary to establish the nature, characteristics and the functioning of the goods. In this case the consumer should not lose the right to withdraw but should be liable for any diminished value of the goods […] In order to establish the nature, characteristics and functioning of the goods, the consumer should only handle and inspect them in the same manner as he would be allowed to do in a shop. For example, the consumer should only try on a garment and should not be allowed to wear it. Consequently, the consumer should handle and inspect the goods with due care during the withdrawal period.” However, in these cases Article 14(2) makes the consumer liable “for any diminished value of the goods resulting from the handling of the goods other than what is necessary to establish the nature, characteristics and functioning of the goods”
One study conducted by Borges on the effects of cooling-off period states that ‘one should expect that there is a considerable difference in withdrawal behaviour depending on whether they are voluntarily granted by sellers or whether they are imposed by law. If the seller voluntarily offers a withdrawal right to the buyers this might be perceived by them as a generous act and they might feel inclined to reciprocate by not exploiting the seller too much. On the other hand a withdrawal right imposed by law would provide the buyers with an entitlement to exert this right. Additionally, it would deprive the seller of showing “friendly” intentions and thereby buyers might not see the need to be considerate of the seller.
In relation to goods being damaged during the cooling-off period, first the CJEU must determine the type of goods in question. In relation to car hire, the Office of Fair Trading produced guidance for businesses who sell vehicles through distance means of communication. Since a car may depreciate in value right after sale and registration, it is unlikely to affect the physical condition of the car and thus car hire companies are liable for refund during that period in the event of cancellation of contract by the customer. However, where the consumer does not take reasonable care of the car he is liable to pay damages for any loss ensued as a result of that damage to the car.
The leading case on the issue of depreciation of value of the goods during the cooling-off period is the Messner case where Mrs Messner, the defendant, bought a second-hand laptop over the internet for 278 euros. After having used the laptop for eight months, it became defective. The right of withdrawal within 14 days of the conclusion of the contract was allowed on the website of the seller, yet another term stated that the consumer has to pay compensation for any depreciation of the goods from the day of purchase to its return.
Initially, Mrs Messner would have had the right of withdrawal of 14 days yet under German Law as per para § 355 of the BGP, yet she never received effective notice of her right of withdrawal before the purchase. The question arose as to whether Ms Messner was allowed a refund pursuant to returning the laptop to the seller after having used it for eight months. Under German Law the seller must inform the consumer of their right “in writing by a clearly formulated notice of his right of withdrawal which makes clear to him his rights in accordance with the requirements of the means of communication used and which also states the name and address of the person to whom withdrawal is to be declared” as per§ 355 of the BGP. Where the distance consumer has not received effective notice on their right of withdrawal pursuant to § 357 paragraph of the BGP their right of withdrawal will not be extinguished. The European Court of Justice decided that the consumer’s right of withdrawal would only be effective where they do not have to pay for any additional costs of returning the goods other than the direct costs of sending the goods back to the trader. The CJEU concluded “it is for the Member States to determine the other conditions and arrangements following exercise of the right of withdrawal.” Yet, it may not “affect the efficiency and effectiveness of the right of withdrawal. Such would, for example, be the case if the amount of compensation, such as that referred to in the previous paragraph, were to appear disproportionate in relation to the purchase price of the goods at issue or also if the provision of national law were to place on the consumer the onus of proving that he did not use those goods during the period for withdrawal in a manner which went beyond what was necessary to permit him to make effective use of his right of withdrawal.”The reasoning behind the courts judgement is that the consumer should not fear that they are liable to reimburse the trader when shopping online and should be given the chance to test the goods, as is now incorporated in the CRD. If the supplier were to be compensated by the consumer than that would undermine the objectives of consumer protection. However, only when [the consumer] has made use of the goods acquired under a distance contract ”in a manner incompatible with the principles of civil law, such as those of good faith or unjust enrichment”, will he have to reimburse the trader. As per Article 14(2) of the CRD, which states; “The consumer shall only be liable for any diminished value of the goods resulting from the handling of the goods other than what is necessary to establish the nature, characteristics and functioning of the goods. The consumer shall in any event not be liable for diminished value of the goods where the trader has failed to provide notice of the right of withdrawal.” Thus, this can be used as a defence mechanism for the online retailer when rejecting to reimburse the consumer for the mishandling of the goods. Hence, the online retailer will be allowed to deduct money form refunds where goods show sign of use or unreasonable handling leading to diminished value. Further, the question as to whether the consumer is liable to pay compensation to the seller for the use of those defective goods until their replacement with new goods is admissible under national law, was deemed inadmissible as ruled in the Quelle case.
The reason for holding the consumer strictly liable for any diminished value of the goods is that “new goods may be turned into second hand goods” and where the consumer is not informed of their right of withdrawal they are only liable for the breach of diligentia quam in suis. However, the limit to the extent of damage done to the goods by the consumer is a matter of contention. As stated by the CJEU that it is crucial to give the consumer a cooling-off period without there being the need for the consumer to worry about the compensating the trader as a result of having tested the goods since “the efficiency and effectiveness of the right of withdrawal would be impaired if the consumer were obliged to pay compensation simply because he had examined and tested the goods acquired under a distance contract. “ It is contended that the consumer may abuse the right of withdrawal for using the good rather than merely testing it when purchasing at distance which would not be allowed in a high-street shop. Thus they could rent a frock for a wedding ceremony or read a book free of charge. The CRD has been criticised for the fact that there is no obligation on traders to give consumers a warning that there exists an obligation on the consumer to not use the goods beyond testing, or to “indicate where the testing ends and use begins, and to give a figure of how expensive the use beyond testing could be.” Thus, traders are free to defining what constitutes “use” in their terms and conditions on their website which may entail that a consumer would have to return the goods in their original packaging, which may lead the consumer to thinking that they are simply not entitled to withdraw from the contract. It is argued that such a term should be classified as an unfair contract term which virtually would undermine the purpose of the consumer’s right of withdrawal. In the Heine case the ruling of the Messner case was reiterated where the CJEU stated that the German courts could not prevent consumers from using their right of withdrawal where an online retailer refused to reimburse the consumer for the delivery costs. " [The Directive] must be interpreted as precluding national legislation which allows the supplier under a distance contract to charge the costs of delivering the goods to the consumer where the latter exercises his right of withdrawal" Member states must refrain from making it impossible or excessively difficult for the consumer to exercise his rights. An example of this would be is the amount of compensation is disproportionate to the actual value of the goods that the consumer has paid for. Another example is when the consumer has to prove that he has tested the goods and not “used” them.
The DG Justice Guidance document concerning Directive 2011/83/EU of June 2014 states that “the diminished value of the goods can consist, in particular, of the cleaning and repairs cost and, if the goods can no longer be sold as new, the objectively justified loss of income for the trader when disposing of the returned good as second-hand good.“ Further guidance states that consumers testing has to be assessed on a case-to-case basis in the event of dispute.
A point of reference is, for example:
∙ Before purchasing audio/video and recording equipment, the consumer would normally be able to test the image or sound quality;
∙ Trying on a garment in a shop would not involve the removal of the manufacturer's tags;
∙ The consumer would not normally be able to practically test household appliances, such as kitchen appliances, the actual use of which unavoidably leaves traces;
∙ The consumer would not be able configure software on a computer; hence reasonable costs for any resetting of such equipment would also constitute diminished value.
The consumer is further protected by the legislation on sales and Consumer sales directive where the consumer should be able to open the packaging to access the goods. Opening the packaging of the goods may only occur if similar goods are normally displayed in shops in unpacked condition and thus damage caused by merely opening the packaging does not make the trader eligible for compensation. For example, any protective films applied to the goods may only be removed where it is strictly necessary to test the goods. However, some sellers stipulate in their contract terms that any good that is being returned needs to be in its original packaging which many may think is an unfair contract term.
Issues such as issues the diminished value of goods are subject to the general contract and procedural laws of Member States, as referred to in Article 3(5) and the CRD is silent concerning these matters. Member states are given the choice to ask for charge for the compensation from the consumer for the damage or may reduce the any refund that is owed to the consumer as a result of diminished value.
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